December 13, 2022

CPI November

India’s retail inflation moderated to an eleven-month low in November’22 and the year-on-year increase came in below expectations at 5.9% as against the reading of 6.8% in October’22. On a sequential basis, prices contracted 0.1%. It is after a gap of ten months that prices declined on a month-on-month basis. Also, it is after eleven months that headline inflation reading has been below the upper target (6%) of the RBI. The decline in inflation was aided by the softening in prices food articles viz. vegetables. At the same time, non-food prices stay elevated, rising on an annual as well as sequential basis. Core inflation remained sticky above 6%, indicative of the pervasive nature of price pressures. This also reflects the price rise being undertaken by various service providers. Core inflation has been above the RBI target range for overall inflation (6%) in 17 of the last 19 months. Rural as well as Urban inflation cooled in November on an annual as well as monthly basis. However, rural inflation continued to surpass urban inflation.

IIP October

Industrial output in October ’22 contracted 4% from a year ago, reversing the 3.5% growth (YoY) of September’22. This was lower than our estimate of growth of 1.1% and the lowest (YoY growth) in twenty-months (August’20). Industrial output growth during the month however was 4.5% higher than the pre-pandemic period of October’19. The decline in overall output was led by manufacturing which contracted 5.6% (YoY). In terms of output based on usage, the decline was fairly broad-based with capital goods, intermediate goods and consumer durable and non-durable goods seeing a decline in output from year ago. The disappointing industrial output is indicative of the weakness in external demand as well as subdued domestic demand. Going forward too, industrial output is likely to be weighed down by these factors.